“School boards need timely and reliable financial information to budget accurately, monitor spending and deal with financial problems. This didn’t happen at either of these school districts, which led to overspending and other problems,” DiNapoli said. “Both school districts are taking our audit findings seriously and making improvements to their fiscal operations.”

Auditors found that the East Moriches school district’s general fund went from a nearly $590,000 surplus in June 2004 to a $3.2 million deficit in June 2006. In May 2005 the former superintendent told the school board that the district would end the 2004-05 fiscal year with an operating surplus of $1 million. In fact, the district ended 2004-05 with a $1.3 million operating deficit, but the board was not aware of the district’s true financial condition until November 2005. As a result, the 2005-06 budget did not address the district’s deficit, which increased to $3.2 million by June 2006, forcing the district to seek state legislative approval to issue bonds to cover its deficit.

Auditors attributed the East Moriches’ deteriorating financial condition to poor budgeting, overspending and inaccurate financial information. Auditors found that district officials underreported district spending in financial reports given to the school board. In addition, during fiscal years 2004-05 and 2005-06 East Moriches overspent what it had budgeted for special education, debt service and student transportation by nearly $4 million. Auditors also recently examined the district’s 2007-08 budget and expressed concern about whether the district had developed a viable plan to address the district’s remaining $1.2 million deficit.

In its review of the Southold school district, auditors found that the district’s 2004-05 budget was inaccurate, which resulted in the district overspending its budget by $746,326. The district covered this overspending by appropriating money from its reserves and fund balance. Auditors also found that the district had overstated its financial position for at least six years because it carried a $760,000 receivable that was uncollectible. Auditors noted that the district had an operating surplus of $126,396 for the 2005-06 fiscal year.

Both districts have taken action to address the audits’ findings these actions are detailed in their written response to the audit. The school districts each have approximately 1,000 students and operating budgets of about $20 million.